7 days of Economics: US, Fed: The Phillips curve is flat

Fed chairman Jerome Powell made important comments during his press conference

Fiscal policy is on an unsustainablepath and lasting widespread tariffs would be bad for the US and the world

Monetary policy remains accommodative and data-dependent

Markets liked the dovish bias in the message

Is it time well spent to watch press conferences of central bank
presidents live? I was wondering as I was following on Youtube
Jerome Powell’s Q&A session with journalists last Wednesday
evening. The questions were clear but the answers were often vague.
It was reminiscent of the press conferences of Mario Draghi: “we
didn’t discuss it” has become a Frequently Used Answer to a FAQ.
Can we expect anything different? After all, market participants (and
journalists) hope for clear answers which take away uncertainty fully
knowing that central banks can’t deliver because they can’t
precommit. After all the future is fraught with uncertainty.

Yet, the Fed chairman’s press conference turned out to be quite
interesting after all and it was not only because of the comment that
the US is on an unstainable fiscal path which needs to be addressed
the sooner the better or because of his point that lasting widespread
tariffs would be bad for American workers. It was also because of the
chairman’s observations on the drivers of monetary policy. Firstly,
there was the clarification that policy was still accomodative although
the word had disappeared from the press release. Bond markets liked
it and yields went down as the chairman spoke. Secondly
there was repeated (implicit) insistence on the data-dependency of
the Fed’s policy, something which echoes Powell’s speech at Jackson
Hole in August. Thirdly, the FOMC pays attention to financial markets:
“I think either a significant – significant – correction and lasting
correction in financial markets or a slowing down in the economy
that's inconsistent with our forecast, those are the kinds of things we'd
react to” and “You know, what we're going to be doing, assuming we
stay on this path, is we're going to be carefully monitoring incoming
data from the financial markets and from the economy and asking
ourselves whether our policy is achieving the goals we want to
achieve”